Friday, December 06, 2013

Libertarian Arguments for Income Redistribution

Matt Zwolinski has recently posted some possible arguments in favor of a guaranteed basic income or something similar. While the position is not one popular with libertarians—the only other example that occurs to me is In Our Hands by Charles Murray—it does raise some interesting questions.

Matt offers three different arguments. The first is that a guaranteed income or something similar would be an improvement on our present system of welfare. That is probably true, especially if you imagine it replacing not only welfare but all policies, such as the farm program, that are defended as helping poor people. The problem, as Matt appears to realize, is that if a guaranteed minimum income is introduced it will almost certainly be an addition to, not a substitute for, current programs.

His third argument is that a guaranteed income is a good thing for reasons that libertarians, among others, should recognize. One version of that is to point out that private charity faces a public good problem, hence that we are on net better off if government taxes us to provide the charity that each of us wants provided but would prefer that other people pay for. This is not a particularly libertarian argument, but it is essentially the same as one that many libertarians accept in the context of national defense.

One problem with the argument here is that we do not have any way of setting up mechanisms for income transfer that can only work in the way we would want them to. Once those mechanisms exist, individuals will try to game or alter them in order to be transferred to rather than from. That will impose real costs—resources spent gaming existing rules and lobbying to change them. And we may end up, as we often have in the past, with transfers that go up the income ladder rather than down or in all directions at once.

The most interesting part of Matt's essay, and the most libertarian part, is the second argument. As he points out, the existing state of the world is in part a result of past rights violations. Land claims in libertarian theory may be based on a series of voluntary transfers beginning with the person who first mixed his labor with the land, but many land claims in the real world run back to an initial seizure by force. Similarly, claims to other forms of wealth must be justified, in libertarian moral theory, by a chain of voluntary transactions back to a first creator. In at least some cases that chain is interrupted by involuntary transactions. Consider a house built by slave labor. Is the legitimate owner the person with the present title to it or the heir of the slaves forced to build it, or is it perhaps partly the legitimate property of one and partly of the other? What about property in other forms inherited through a chain that leads back to a slave holding or slave trading ancestor who owed, but never paid, compensation to his victims?

Most libertarians would recognize this as a legitimate problem, although many might point at the practical difficulty of establishing just ownership in such cases as justifying some sort of statute of limitations with regard to wrongs in the distant past. Matt's alternative, suggested by a passage he quotes from Nozick, is to argue that the descendants of those who gained by past rights violations are on average better off than the descendants of those who lost, hence redistribution from richer to poorer in the form of a guaranteed minimum income represents an approximate rectification for past injustice.

While the argument suggests that transfers from richer to poorer might do a better job of rectification of past injustices than random transfers, it does not imply that such transfers do a better job than doing nothing, that they on net reduce injustice rather than increasing it. Some present wealth may be due to causes that are, from the standpoint of libertarian moral theory, unjust, but not all. If I justly owe you forty cents, taking a dollar from me and giving it to you makes the resulting distribution less just, not more. Unless most inequalities are inherited from past rights violations, a claim I think few libertarians would support, the logic of the argument breaks down.

A brief digression is needed here to distinguish between wealth due to past rights violations and wealth inherited from such violations. Suppose I am one of two doctors in a town. Someone murders the other. The result is to increase demand for my services, hence my income. I have benefited by the murder but I have not violated any rights, so do not owe the victim's heirs any compensation. The current distribution of income is due to all sorts of events in the past, some of them unjust, but it does not follow that everyone who is better off as a result of past history, even past rights violations, owes a debt to everyone who is worse off as a result.

A further problem with Matt's argument is that, even if you believe that a guaranteed basic income reduces net injustice, it is hard to argue that it is the best rule of thumb for the purpose. Consider the case of Afro-Americans. Almost nobody whose ancestors immigrated to the U.S. after the Civil War is the heir of benefits created by violation of the rights of their ancestors by his ancestors. On the other hand, the ancestors of present-day Afro-Americans were enslaved by Africans to be sold to European slave traders. The present inhabitants of Africa, at least sizable parts of it, are more likely than the present inhabitants of North America to be descendants of people who owe, and did not pay, reparation to slaves and their descendants.

It follows that Matt's second argument implies that the (very poor) present inhabitants of Africa owe compensation to the (relatively rich) present American blacks. I do not think Matt would accept that argument, whether or not he could rebut it. If so, he does not really believe in his second argument.

Readers sufficiently interested in these issues my want to look at the draft of one of the new chapters for the third edition of The Machinery of Freedom which discusses some related arguments for redistribution.

22 Comments:

The argument about compensating for past rights violations could make sense if we wanted the judicial system to compensate for or correct all past wrongs, doing justice in what amounts to a timeless, Platonic sense. But that is not how real judicial systems work. If, for example, I have been crossing your land to get to the road for a number of years, the law will not let you go back in time to before I started doing so, and start over; in fact it will give me a right to go on crossing your land, called an easement, based on established custom. Or consider laws that prevent the criminal justice system from going back to punish things that you did a decade ago.

And I think there are good reasons for this. In the first place, human beings being what we are, there is hardly any occupied area that has not seen a long history of wrongs going back to its first occupation; there just isn't time to go back and resolve them all, but if we don't, no one could ever be secure in any property rights. Should courts in Israel be hearing suits from descendants of the ancient Canaanites? Or should the Anglo-Saxons be surrendering England to the British? And in the second place, if we heard such suits, how much human effort would be diverted from producting new wealth to fighting over existing wealth in a long string of court battles?

What is the difference between guaranteed basic income and the negative income tax from Milton Friedman? They seem functionally equivalent.

Regarding the question of righting past wrongs, there is definitely a challenge for figuring out the details. But that does not mean that a large segment of the population should be presumed guilty. That strikes me as un-libertarian (ie aggression).

I've always appreciated the way Mises looked at the issue of redress. He acknowledged that property rights often came from unjust seizures if you trace those property rights back to the original owners.

Fine, but then Mises went on to point out that trade is the only peaceful means of handling property rights in the present and future.

I think it's noble and rational to acknowledge that property rights cannot always be traced to just circumstances. But the redress for this is not a new form of institutionalized injustice. The redress is to draw the line here and now and proceed under the knowledge that free trade is the only peaceful means of property rights transfer.

it is interesting to see how past violations of property rights relate to the concept of schelling point. Are these violations considered as deviations from a focal point that current redistribution advocates are aiming to come back at? or is the fact that some rights have been violated in the past (with the significant difficulty of determining the specific victims and violators) what constitues a new schelling point? My instinct tells me that the second answer is more credible (as the first one assumes that redistribution helps the victims) especially as people are very suspicious of reditribution policies but i really don't know whether it is accurate.

While the argument suggests that transfers from richer to poorer might do a better job of rectification of past injustices than random transfers, it does not imply that such transfers do a better job than doing nothing, that they on net reduce injustice rather than increasing it.

Agreed. If, in practice, force were required to transfer the wealth -- and surely force would be required, it's not like those better off today are going to do it willingly -- then arguably injustice is increased. Certainly it would in the minds of many of these people who, rightly so, will argue they should not be held responsible for the sins of their distant ancestors. Two wrongs don't make a right and all that.

but why no mention of moral hazard? if min income is $20k, what do you think people who earn $23k will do? many people close to that min income level will stop working...this will breed culture of poverty and you will have 1980s ghettos again

"Consider the case of Afro-Americans. Almost nobody whose ancestors immigrated to the U.S. after the Civil War is the heir of benefits created by violation of the rights of their ancestors by his ancestors."

This would be true if no rights of Afro-Americans were violated after 1865. But I understand that this was not what actually happened.

These aren't libertarian arguments; at best they are communitarian ones. They seek to redress (putative) past violations by enriching one group of persons (none of whom were themselves the subject of any such violations, and who may not even be descendants of persons who were) by penalizing another group of persons who did not commit any such violations and may not even be descended from those who did. There is nothing moral or ethical about this, and certainly nothing remotely libertarian.

Also, his "private charity" argument is particularly nonsensical. Claiming that "on net" we are better off if government takes over the functions of private charities completely ignores both the transaction costs involved and the relative inefficiency of government. A government "charity" (read: welfare) consumes a vast percentage of the available funds in the form of salaries and expenses of administration, which as a rule a far lower in the case of private charities. Furthermore, by running charitable functions through government they of necessity become "one size fits all" programs (if only due to fairness principles) without the ability to tailor the benefits provided to the needs and merits of specific beneficiaries. Governmental "charities" are grossly wasteful and inefficient, and have the further deleterious effect of "crowding out" private charities operating in the same space. "On net" they make society worse off, not better.

"These aren't libertarian arguments; at best they are communitarian ones. They seek to redress (putative) past violations by enriching one group of persons (none of whom were themselves the subject of any such violations, and who may not even be descendants of persons who were) by penalizing another group of persons who did not commit any such violations and may not even be descended from those who did. There is nothing moral or ethical about this, and certainly nothing remotely libertarian."

the argument as presented looks a bit different:as a compensation for past, current, possible future injustice, that occurs; every citizen is penalized equally on how productive they are, to in turn "enrich" citizens on the lowest end of the spectrum.

Enrich here means providing a minimum standard of living below no fellow citizen is meant to fall, plus a flat percentage of what they earn from work.

"They seek to redress (putative) past violations by enriching one group of persons (none of whom were themselves the subject of any such violations, and who may not even be descendants of persons who were) by penalizing another group of persons who did not commit any such violations and may not even be descended from those who did. There is nothing moral or ethical about this, and certainly nothing remotely libertarian."

HEAR HEAR!!! but different people have different (often wrong or at least inconsistent) views of justice/ethic etc. so democrats who all believe in identity and group politics would say it perfectly just to transfer money from David Friedman to give to blacks because he is white, even though his family came to america only around 1900.

of course redistribution is not REALLY about philosophical musings. its about politics and winning power. that is why GOP does plenty of redistribution too. politicians do not begin with philosophy and design a policy around that philosophy, they design the policy and then search for a philosophy to justify it.

I haven't read the book by Murray you refer to, but in Losing Ground he convincingly (to me at least) argues that there is no way to construct a welfare system that does not entail perverse incentives, and he singles out negative income tax as a prime example.

Various socialist schemes such as Social Security, Medicare, Medicaid and Obamacare also make us all less responsible. We become less used to taking care of ourselves and less prone to voluntarily help others.

Then there is the fact that society is a "complex adaptive system". There is no way, as Hayek points out, to know what "merit" is and know who "deserved" the wealth they enjoy, who did not, and who "should" have become wealthy, but did not.

David, maybe you have a reference for this, but I seem to remember that the "half-life" of wealth is such that the effect of how rich someone's ancestors were disappears after 2(?) generations.

It is comical to read that so many on the left quote Tocqueville. Tocqueville says that there is no society where the "equality of condition" is more pronounced than in the US. But the opposite of the equality of condition he talks about is that between a nobleman and a commoner. No matter how poor, a nobleman commands.

The equivalent to non-equality of condition would be to think that a Harvard professor is above a plumber.

I think you're misunderstanding how basic income works. It's not like with welfare, where you must forfeit the grant to earn income. A person who was earning $23k before a $20k grant was put in place would earn $43k afterwards--assuming he chose to continue working at the same job for the same pay.

Of course, in reality, he probably wouldn't keep working the same amount. The simple economics picture of hours worked says he will work until his wage equals the marginal value to him of an hour of labor. Since we've given him a $20k per year grant, he has more money, so money should be worth less to him, so leisure will be worth more in dollar terms, so the equilibrium point will be for him to work fewer hours. But he won't stop working altogether. (The collective effect of everyone getting this will be to reduce the supply of labor. This will slightly increase wages to compensate, but it will fall short of optimal employment.)

I do think that most present-day inequalities trace back to past rights violations. I see no other plausible explanation for inequality between races. Unless you go in for some sort of genetic argument, any current cultural factors must trace back to rights violations - not just slavery, though of course that, and of course mid-century segregation, but also legal housing discrimination, like restricted covenants, that weren't all that long ago. As a privileged white person,I admit that my familial advantage is unfairly gained. I'd welcome a systematic way to give back what I owe.

The whole argument comes down to whether you believe that "most" inequality is the result of rights violations. And if you don't, then to what do you attribute it? Inherent work ethic? And where does that come from?

As for the law establishing easements, whswhs's easement comparison is in mataphor arguing that as a white person, I should be allowed to trample over African Americans to my just reward of gainful employment and property holding, because my ancestors did. That's pretty ugly.

As for statutes of limitations and security in property rights: yes, those are decent points. But one person's crime is different than a whole society's crime, and the hurt this society's crimes caused is not going away, and it can be partially remedied. Let's do it.

Laird nails it and the comment after that too.The guys at BHL are smart but they are mental masterbators with very little in the way of philosophical consistency or moral integrity.The answer is: get over it and move forward. As long as someone is not continuing the use of force over you, there is little beneficial action that one can take for oneself other than to learn not to associate (or how to avoid) those types of people.The ring of power is the problem not how it's used.

Robert Heinlein was a big believer in a basic income guarantee, at least early in his career. Once could argue that the gleaner laws in the Bible were also an example of a basic income guarantee as well, a form of welfare designed to work in a society with no king, president or legislature.

My own libertarian justifications for a basic income guarantee can be found here: http://www.freemoneyforall.org/justifications/

The guys at BHL are smart but they are mental masterbators with very little in the way of philosophical consistency or moral integrity.

I think that most left libertarians have taken the same position as David and his father; that there is no such thing as morality and natural rights. As such they can justify theft today to right some wrong done by thieves in the past and can claim to be libertarian and still argue for redistribution by using the force of government. When I first read Mises' claim that some of the great thinkers had abandoned rationality in order to advance political causes driven by emotion I thought that he was exaggerating. As I read the postings of supposed libertarians today I realize just how right he was.

Basic Income is paid predominantly by an LVT (a land rental tax). The LVT is voluntary, however, failure to pay a sufficiently high LVT subjects the land owner to "trebling" where either the landowner must pay 3 times the LVT to keep the land or a new owner will pay 3 times the LVT plus pay the current landowner 120% of the property improvements. A small portion of the basic income (universal entitlements) comes from parents before they are allowed to bring a child into the world. This protects women from becoming wealth creation machines as each child becomes an immediate source of family and community wealth. Yes it is a new form of coercion but hopefully it can quickly whither away as society learns reproductive responsibility. Game theory says that people will tend to have as many kids as possible otherwise.